The Nuclear Option?

Several things happened this past week that were easily connectable and in my opinion can be put together to understand what is happening in the big picture. I plan to interject some opinion (mine) in this piece, if you disagree then I would say that you are entitled (still), just as I am entitled to my opinion.

China announced that they plan to trade, price and create an exchange for both oil and gold …in Yuan. They also plan to set up a global payments system that settles in Yuan. A financial salvo was fired by the U.S. against Russia as their credit rating was downgraded to one notch above junk. Russia has responded by publicly making plans to abandon the dollar completely and also exiting the sovereign debt of NATO allies. We also heard that President Putin has “temporarily” shut off all communication with President Obama while John Kerry’s calls to his Russian counterpart have gone unanswered. This is really bad stuff to put it mildly.

One other strange event that occurred was that the USS Donald Cook has been seen exiting the Black Sea. Originally this ship was sent in as assurance to our allies and as a show of strength. Russia today reported that one of their jets “buzzed” the Donald Cook 12 times (and confirmed by the U.S.), they also claim that the “Aegis” defense system was shut down or jammed by the Russians and it was rendered defenseless. Some may say that since this news came from a Russian source that it is propaganda, I personally believe it. I say this because why else would the Thomas Cook exit the arena as tensions are as high now as at any point? In my opinion, Russia “tested” our Aegis system to see if they could jam it and they did. The Donald Cook has retreated because were an Aegis class warship to be hit or even sunk, “invincibility” would be disproven. Again, this is just my own opinion.

I titled this piece “The Nuclear Option” because I believe that we are very very close to being blown up financially. As I mentioned last week, James Turk has reported that gold bars from the 1960’s and prior are beginning to surface in the global markets. We also know that the U.S. exported a huge 80 tons of gold in January. I wrote a week or two back that in my opinion the elevated open interest in silver has Chinese origins but I cannot prove it. We also know that all of a sudden Belgium has become a huge buyer of U.S. Treasuries; this is surely some sort of Fed or EU central bank proxy to sop up selling without the Fed tipping their hand to outright monetization.

What I am saying is that the stage is set. I believe than an all-out attack on the dollar is about to commence…and gold/silver will be the “bullets” so to speak. I believe that the Chinese have seen a “change” in the “type” of gold that is being delivered to them and they know the math. When I say they know the “math” I mean that they know how much they have accumulated and subtracted this amount from what they believe that the West originally had…which is now being confirmed by pre 1960’s gold hitting the market. They know that we are on the ropes.

The above said any strategist worth their salt will wait until their opponent is weak or has been weakened and I believe our opponents have come to this conclusion. They know that we are low on gold, they know that there are no large stockpiles of silver, they know that we are printing dollars like crazy to stay afloat, they know that we are in debt in every way imaginable above our heads, they know that we are monetizing debt, they know that Europe will not side with us if their supply of natural gas is shut off and they now know (in my opinion) that they have cracked the Aegis defense system. They also know that our economic numbers are a total sham and that unemployment and inflation are grossly higher than we report. In short, they know that we are full of crap. “Pulling the trigger” at this point is not a huge effort and will certainly not take a lot of money. I estimated 2 years ago that the silver market could be completely cornered with as little as $5 billion (or less)…so maybe they’ll use $10 billion? Gold, (if we are out as I suspect) could be cornered in my opinion with a concentrated $20 billion order…so maybe they’ll use $100 billion? “Where” will this type of money come from you ask? The sale of U.S. Treasuries of course, killing two (or more) birds with one stone (our own) by cornering the metals and dumping Treasuries to pay for it.

I believe that the plan is to “isolate” the U.S., even without any “help” we are doing this all by ourselves. I can envision several events taking place all at the same time. Russia could push into the Ukraine, China could become aggressive with Japan, and North Korea takes their cue and attacks South Korea while Iran and Syria strike at Israel…all at once… while Saudi Arabia switches allegiance. Dollars and Treasuries are dumped with the proceeds use to “call” our paper metals markets and demanding deliveries. Interest rates may not rise as the Fed would surely become a buyer but the value of the dollar would certainly crater. Were all this to occur at once, how could we respond? Our military is too stretched and too weakened to cover 4 fronts at once. Any major defeat of our “technology” such as the sinking of an Aegis class ship would on its own sink the dollar by 25% or even more. I could envision all of this taking place, the smoke already beginning to clear and a very different looking world over a 2 week period. Please keep in mind that our markets, our system as a whole, are now more leveraged and more extended than any other time in history.

This opinion or thought process I have titled “The Nuclear Option” because our financial system would go so far up in smoke in such a short period of time there is no other name for it. This would leave us with only one option…”the nuclear option.” We would have only one retaliation available to us and that unfortunately would be the use of tactical nuclear weapons

I know that hearing this opinion is not pleasant. I am not writing this to be alarmist; I am writing it because this is how I see it. History has shown us that whenever one country “stiffs” another country financially …war usually is the result. In this case it is the U.S. that has “stiffed” the rest of the world by (over)issuing dollars that have been freely printed to pay for real goods which we have imported. We have “over” lived our means on the backs of the rest of the world for many (too many in their opinion) years and payback is what I believe the rest of the world desires.

All of this is just my opinion but I am willing to bet that it’s not too far off from what is actually heading straight for us.

31 Comments

RF
on April 28, 2014 at 12:30 pm

Bill,

I think the Russian and Chinese fat ladies are just about to sing.

Bill Holter
on April 28, 2014 at 12:55 pm

it seems like the stars are aligned doesn’t it?

M1yman
on April 28, 2014 at 3:14 pm

Unfortunately, we have reached the era of:

Look out below! Here come the dollars, all billions of them!

Bill Holter
on April 28, 2014 at 3:24 pm

wrong moneyman, all “$Trillions” of them.

M1yman
on April 29, 2014 at 9:25 pm

I stand corrected, Bill. However I would add that once we’re smothered in an overabundance of fiat bills here in the homeland who will be able to recognize whether we’re being smothered by billions or trillions? I’m sure I wouldn’t be able to tell the difference between the two.

Excellent article.

Gary
on April 28, 2014 at 3:22 pm

I don’t believe our “enemies” will attack in any of the theaters you mention, Bill. (Though they may be forced to defend!) They’re in such a strong position now that they don’t have to. They’re being heavily baited into a fight on many fronts in order to provide cover for the inevitable $USD collapse. They (Russians, Chinese, N. Koreans) certainly don’t want to be perceived as the ones who wrecked America — though it will be reported that way domestically (as we’re seeing now via endless anti-Russian propaganda). No, better to let The West fall flat on its face all by themselves.

Bill Holter
on April 28, 2014 at 3:26 pm

could be but Russia has already moved with respect to Crimea and the Ukraine arena looks pretty hot to me.

Silver Stacker
on April 28, 2014 at 4:31 pm

Bill I don’t think it would take too much to get the derivatives nuclear chain reaction started. Another great article.
GOT SILVER?

Bill Holter
on April 28, 2014 at 4:45 pm

thanks SS, Deutsche Bank has $75 trillion of the stuff.

Goldman
on April 28, 2014 at 6:20 pm

Bill you maybe right. Hopefully your wrong. I’ve been in the nuclear business for 26 years before I retired so I can speak from experience,if the nuclear option is used, it won’t matter how much gold or silver you have. lets prey it never comes to that.

Bill Holter
on April 28, 2014 at 7:34 pm

I agree

Susan
on April 28, 2014 at 6:36 pm

What you have written, Bill, is not at all pleasant to contemplate. Unfortunately, I think you have analyzed the situation at depth with great insight and astuteness.

Are we taking bets as to how long your blog will remain “up” and/or how long it will take before this website experiences catastrophic technical difficulties? Susan

Bill Holter
on April 28, 2014 at 7:35 pm

thank you Susan…I hope that is not the case.

From Australia
on April 28, 2014 at 9:02 pm

I can relate to Bill on this, though I was thinking maybe the US will tie Russia up with war, namely Ukraine first off, then into Syria (already upped the supply of military hardware) until the bonfire is rageing (more stretched Russian troops & Assets) and then into Iran! Turkey is already moving troops into Syria, Israel is also moving troops along the Iranian border….

Bill Holter
on April 29, 2014 at 6:05 am

yes it is complicated but I think the U.S. will be the one that is “tied up”.

From Australia
on April 28, 2014 at 9:35 pm

That leaves China to deal with in a major second wave! Obama has just finished doing the Asian rounds, and my own country has just purchased another 50 plus F35’s bringing total number up near 80. What does Australia need so many of these for? It is the most our country has spent on one asset in our entire history, and our enconomy is crashing! There is something we are not being told!

Bill Holter
on April 29, 2014 at 6:11 am

there is always “something” not being said.

Victor
on April 29, 2014 at 7:14 am

The Russians are presently selling worldwide portable radar systems that are able to keep under surveillance the so-called stealth F-35 and F-22 aircraft, which makes Australia’s purchase really sad.

Keith
on April 28, 2014 at 11:39 pm

I guess whatever the western central bankers want the us government will follow. They will make money on the war but what I don’t understand is this time it’s nuclear and no one wins .

Bill Holter
on April 29, 2014 at 6:06 am

yes

Keith
on April 28, 2014 at 11:47 pm

Or is it staged like it was during the Cuban missile crisis? JFK looked weak from bay of pigs and Khrushchev too aggressive with Berlin Wall so let’s have a standoff showing JFK with a win and Khrushchev backing down so he looks sane. My history teacher explained this to me after the archives were declassified. So what do they really want the public to think? Just throwing another viewpoint out there as if they can manipulate all markets then why not this?

Bill Holter
on April 29, 2014 at 6:07 am

I think this is bigger than a stage production.

larry bohlman
on April 29, 2014 at 12:13 pm

The USS Taylor’s stay in the Black Sea from Feb. 5 to March 9, was deemed by the Russian government as a violation of the so-called 1936 Montreux Convention Regarding the Regime of the Straits.
Montreux rules call for warships from countries with out a coast on the Black Sea to depart after 21 days.

Bill,
I liked what you said and had similar though not as detailed thoughts. I thought russia would threaten USA and china threaten Japan while monetary measures are taken at same time. Don’t know if china would unleash n. Korea, might be more than they would like to have to worry about and not necessary. Your point on the aegis test was really enlightening, I didn’t know the destroyer left the area after the passes (of course western western media won’ t mention). The biggest thing is would we go nuclear. I think the powers in control don’t want that, being on the risky side even if they think they’ve established safe haven. Good analysis though.

Perhaps the time is ripe to establish a fair and true international currency that is NOT also the currency of any nation.
It is certainly true that USA has lived on the back of the rest of the world at an ever-increasing rate since the Bretton Woods agreement in 1944.
A true international currency with an exchange mechanism that required all nations to keep their account in equilibrium would eliminate all these tensions and ensure a more peaceful world.

Bill Holter
on April 30, 2014 at 8:07 am

gold would do that

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